Britons are collectively paying £9 billion a year in interest on credit card debts they have accumulated with the average person owing £3,256 on their plastic.
And more than two-thirds of people have at least one credit card according to high street bank Abbey.
Only 36% of credit card holders pay off their balance in full each month, with more than 40% of people admitting they have owed money through their card for at least a year, while 22% have had credit card debt for more than four years.
Men tend to owe slightly more on their plastic than women, having an average outstanding credit card balance of £3,627, compared with women’s £2,778.
Switching saves money
But despite the four-figure debt that people have run up on their plastic, 55% of people have never moved their balance to a 0% interest deal, and only 19% plan to do so during the next few months.
Martyn Saville, credit card expert at Which? said: ‘Credit card companies are using more and more ways to claw back cash from their customers, whether it’s increased APRs, rising balance transfer fees, higher cash withdrawal rates or fewer days to pay.
‘We’re now seeing lenders becoming less willing to lend to many customers, sometimes cutting credit limits drastically.
We’ve seen one case where a customer’s credit limit was slashed from £5,400 to just £150.’
Falling credit card limits
Meanwhile, research carried out by financial website MoneyExpert.com found that an estimated 2.7 million credit card holders have had their credit limit reduced during the past six months, with an average of £1,960 knocked off the amount they can spend on their card.
The group said the trend to reduce credit limits appeared to be accelerating, as 1.8 million people had their credit limit reduced during the same period a year ago, when the average reduction was around £1,600.
Martyn Saville advises that you don’t have to accept these cuts: ‘Lenders should not reduce your credit limit below what you already owe on the card – if they try to, complain in writing to your credit card provider.
‘Similarly, if you think your credit limit has been cut unfairly, ask your credit card company why. If you don’t like the answer, or if they won’t budge, switch to a different card from our Best Buys.
You also might want to check out our interactive credit card calculator to find out how much you could save by switching.
If your provider hikes up the interest rate they’re charging on existing credit card debt, you have the right to cancel the card and pay down the debt at your old rate. Providers have to give you 30 days’ notice of any APR increases.
And if you’re struggling to find a new card that will accept your application, it could be time to re-examine your finances.
Don’t turn to debt management companies or doorstep lenders charging high APRs – Citizens Advice, National Debtline and the Consumer Credit Counselling Service all offer free and impartial debt advice that can help you sort out your financial affairs.
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